7 Risks in Biosimilar Space

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Biosimilar

Biosimilar has been quite a trending topic. In fact, the pharma sector as a whole is in a bull run, grabbing many eyeballs.

Samsung Biologics (also has CDMO) is trading at around 40 times its sales, Wuxi Biologics is at 30 times Sales. The price-to-sales figure might look too inflated but has some merit as well like Wuxi has grown sales at 45% CAGR for the past 5 years.

So while the sector is trading at high valuations, let’s discuss the risks in this space:

Regulatory Risks

This is a known risk in the pharma and biosimilar space. If regulators are not satisfied with the quality, they can reject the biosimilar. One such notice from the FDA can make the price multiples collapse.

Litigation by Innovator

Innovators simply sue the copycats, of infringing some patents. This can delay the launch of the biosimilar.

Patent Thicket

The innovator files multiple patents on the original biologic such that patents last for more than 20 years. While companies are issued a single product patent, they also patent things around the biologic like the manufacturing process. AbbVie applied for 165 patents on Imbruvica, out of which it has been granted 88 patents, extending patent life by 9 years to 29 years. This overlapping dense web of patents is called a ‘patent thicket’ such that others cannot copy the drug for a longer period of time. The same company applied for 249 patents for its biologic ‘Humira’, extending the patent life up to 39 years.

Also Read on FinMedium:  Abbott India - Annual Report Notes & Summary

The Patent Dance

BPCIA (Biologics Price Competition and Innovation Act) provided for a way to reduce litigation hurdles from the innovator side. But it did not quite work the way it was intended to. The biosimilar companies shared information with the innovator, so as to make sure that no patents were being infringed and no future infringement case is filed. Some innovators, in turn, used this sensitive information about the biosimilar to further strengthen their patent claims. 

Blind Litigation in Biosimilar

Now as companies are avoiding patent dance, innovators are using going the blind litigation route to stop their competitors from bringing the biosimilar to the market. With the innovator having no information about it, they blindly assert claims for several patents. 

The puzzlement here is to go for the ‘patent dance’ which somewhat limits the scope for several litigation claims or share no information at all and face ‘blind litigation’.

Innovators giving rebate to Insurers

Innovators enter into ‘exclusive’ coverage arrangements with insurance companies and offer rebates to insurers. This, in essence, blocks the market for biosimilars. Pfizer had filed a lawsuit against J&J, accusing the innovator of entering into anti-competitive practices by offering rebates and insulating its biologic ‘Remicade’ from the threat of ‘Inflectra’ (Pfizer’s biosimilar).

Also Read on FinMedium:  Vedanta Limited Delisting Analysis

Marketing and Brand Loyalty

Innovators provide many value-added services, like offering a device for injecting biologic. The cost of switching to another biosimilar in such cases can be tricky and the customer might not switch. Also, brand loyalty and trust play a vital role. Convincing doctors and patients regarding the effectiveness of biosimilar can be a huge task. 


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Cover Image: Rheumatology Advisor

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Sneh Kagrana
Sneh loves to write about the things that surround the financial system of the world. He shares his wisdom on a daily basis through his new venture - Daily Shots.
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